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The Information Contents of VIX Index and Range-based Volatility on Volatility Forecasting Performance of S&P 500

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Author Info

  • Jui-Cheng Hung

    ()
    (Lunghwa University of Science and Technology)

  • Ren-Xi Ni

    ()
    (Takming University of Science and Technology)

  • Matthew C. Chang

    ()
    (Hsuan Chuang University)

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    Abstract

    In this paper, we investigate the information contents of S&P 500 VIX index and range-based volatilities by comparing their benefits on the GJR-based volatility forecasting performance. To reveal the statistical significance and ensure obtaining robust results, we employ Hansen's SPA test (2005) to examine the forecasting performances of GJR and GJR-X models for the S&P500 stock index. The results indicate that combining VIX and range-based volatilities into GARCH-type model can both enhance the one-step-ahead volatility forecasts while evaluating with different kinds of loss functions. Moreover, regardless of under-prediction, GJR-VIX model appears to be the most preferred, which implies that VIX index has better information content for improving volatility forecasting performance.

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    Bibliographic Info

    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 29 (2009)
    Issue (Month): 4 ()
    Pages: 2592-2604

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    Handle: RePEc:ebl:ecbull:eb-09-00548

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    Related research

    Keywords: Range-based volatilities; GJR-based volatility forecasting; VIX index; SPA test;

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